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Chapter 5 F&M accnt

glossary terms

QuestionAnswer
account form The form of balance sheet that resembles the basic format of the accounting equation, with assets on the left side and Liabilities and Stockholders’ Equity sections on the right side.
accounts payable subsidiary ledger The subsidiary ledger containing the individual accounts with suppliers (creditors).
accounts receivable subsidiary ledger The subsidiary ledger containing the individual accounts with customers.
administrative expenses (general expenses) Expenses incurred in the administration or general operations of the business.
controlling account The account in the general ledger that summarizes the balances of the accounts in a subsidiary ledger.
cost of merchandise purchased The cost of net purchases plus transportation costs.
cost of merchandise sold The cost that is reported as an expense when merchandise is sold.
credit memorandum (credit memo) A form used by a seller to inform the buyer of the amount the seller proposes to credit to the account receivable due from the buyer.
credit period The amount of time the buyer is allowed in which to pay the seller.
credit terms Terms for payment on account by the buyer to the seller.
debit memorandum (debit memo) A form used by a buyer to inform the seller of the amount the buyer proposes to debit to the account payable due the seller.
FOB (free on board) destination Freight terms in which the seller pays the transportation costs from the shipping point to the final destination.
FOB (free on board) shipping point Freight terms in which the buyer pays the transportation costs from the shipping point to the final destination.
freight in Costs of transportation.
general ledger The primary ledger, when used in conjunction with subsidiary ledgers, that contains all of the balance sheet and income statement accounts.
gross profit Sales minus the cost of merchandise sold.
income from operations (operating income) Revenues less operating expenses and service department charges for a profit or an investment center.
inventory shrinkage (inventory shortage) The amount by which the merchandise for sale, as indicated by the balance of the merchandise inventory account, is larger than the total amount of merchandise counted during the physical inventory.
inventory subsidiary ledger A ledger containing individual accounts with a common characteristic.
invoice The bill that the seller sends to the buyer.
merchandise available for sale The cost of merchandise available for sale to customers calculated by adding the beginning merchandise inventory to net purchases.
merchandise inventory Merchandise on hand (not sold) at the end of an accounting period.
multiple-step income statement A form of income statement that contains several sections, subsections, and subtotals.
net purchases Determined when purchases returns and allowances and the purchases discounts are deducted from the total purchases.
net sales Revenue received for merchandise sold to customers less any sales returns and allowances and sales discounts.
other expense Expenses that cannot be traced directly to operations.
other income Revenue from sources other than the primary operating activity of a business.
periodic inventory system The inventory system in which the inventory records do not show the amount available for sale or sold during the period.
perpetual inventory system The inventory system in which each purchase and sale of merchandise is recorded in an inventory account.
purchases discounts Discounts taken by the buyer for early payment of an invoice.
purchases returns and allowances From the buyer’s perspective, returned merchandise or an adjustment for defective merchandise.
report form The form of balance sheet with the Liabilities and Owner’s Equity sections presented below the Assets section.
sales The total amount charged customers for merchandise sold, including cash sales and sales on account.
sales discounts From the seller’s perspective, discounts that a seller may offer the buyer for early payment.
sales returns and allowances From the seller’s perspective, returned merchandise or an adjustment for defective merchandise.
selling expenses Expenses that are incurred directly in the selling of merchandise.
single-step income statement A form of income statement in which the total of all expenses is deducted from the total of all revenues.
subsidiary ledger A ledger containing individual accounts with a common characteristic.
trade discounts Discounts from the list prices in published catalogs or special discounts offered to certain classes of buyers.
Created by: 551231446